Filed by Automated Filing Services Inc. (604) 609-0244 - U.S. Geothermal Inc. - Exhibit 10.12





 EMPLOYMENT AGREEMENT 

  THIS AGREEMENT made as of the 1st day of January 2004


 BETWEEN: 

	 	US Geothermal Inc., a body corporate having an office at Suite
      B,1509 Tyrell Lane Boise, Idaho 83706 

      (the "Company") 


 AND: 

	 	Daniel Kunz of 1509 Tyrell Lane, Suite B, Boise, Idaho 83706 

      (the "Employee") 


 WHEREAS:

	(A)	 the Company is in the business of developing the Raft River geothermal
      property; 
	 	 
	(B)	the Company wishes to engage the Employee as President and Chief Executive
      Officer; and 
	 	 
	(C)	the parties hereto wish to enter into this Agreement
        for the purpose of fixing the compensation and terms applicable to the
        employment of the Employee during the period hereinafter set out. 



NOW THEREFORE THIS AGREEMENT WITNESSES that the parties
  hereto, in consideration of the respective covenants and agreements on the part
  of each of them herein contained, do hereby covenant and agree as follows: 

 1.          Employment
   

 The Company hereby engages the Employee as President and Chief
  Executive Officer of the Company, and the Employee hereby accepts such employment,
  upon the terms and conditions hereinafter set out. 

 2.          Term
   

 This Agreement will be effective from 1st January
  2004 and will remain in full force and effect until terminated as hereinafter
  provided. 

 3.          Responsibility
   

 The Employee will devote appropriate working time to his Employment
  hereunder, and while engaged in his employment will have the authority and duty
  to perform and 








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 carry out such duties and responsibilities as are customarily
  carried out by persons holding similar positions in other development companies
  comparable in size to the Company and such additional and related duties as
  may from time to time be assigned, delegated, limited or determined by the Board
  of Directors. 

 4.           Other
  Business Activities  

 It is agreed that the Employee's employment hereunder shall
  constitute no less than eighty (80) hours per month which shall be devoted exclusively
  for the benefit of the Company, and therefore: The Employee may be required
  to provide additional time to perform his duties and responsibilities and will
  be remunerated for such incremental time in accordance with Paragraph 5 (b).

	 	(a)	the Employee may engage
        in any other business activities, so long as such activities will not
        interfere with, or impede, in any significant manner the performance of
        his duties as President and Chief Executive Officer of the Company provided,
        however, that: 

	 	 	 	 
	 	 	(i) 	other than the business activities already disclosed
        to the Board of Directors , before the Employee can engage in any such
        other business activity which involves the Employee owning or acquiring
        any interest, directly or indirectly, in any geothermal property or the
        rendering of any advice or service to another person, partnership or other
        legal entity or a joint venture engaged in the business of exploring for
        and/or developing geothermal resources the Employee must disclose full
        particulars thereof in writing to the Board of Directors, and within 15
        days after the date of such disclosure, the Employee must receive from
        the President a decision that such activities by the Employee will not,
        in the opinion of the Board of Directors, interfere or be in conflict
        with the Employee's performance of his duties to the Company hereunder;
      

	 	 	 	 
	 	 	(ii)	Before engaging in any such other business activity
        other than an investment or acquisition of the kind described in sub-paragraph
        (a)(i) of this Section 4, the Employee shall have disclosed same in writing
        to the Board of Directors; and, 

	 	 	 	 
	 	 	(iii)	an investment or acquisition of the kind described
        in sub-paragraph (a)(i) of this Section 4 does not include investment
        in publicly traded development or other resource companies, where such
        investment does not constitute 10%, either directly or after exercise
        of any share acquisition rights, of the issued capital of the company
        in question, nor a control position, nor part of a control block. 











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	 	(b)	the Employee shall refer to the Board of Directors
        any and all matters and transactions in respect of which an actual or
        potential conflict of interest between the Employee and the Company has
        arisen or may arise, however remote the possibility, and the Employee
        shall not proceed with any such matter or transaction until the Board
        of Director’s approval therefore is obtained. Such approval shall
        not be denied unless it is evident that it will impact the Company’s
        competitive position. For purposes of clarification, this provision is
        not intended to limit in any way the Employee's other fiduciary obligations
        to the Company, which may arise in law or in equity. 



5.           Compensation
   

 In consideration of the performance by the Employee of his
  responsibilities and duties as President and Chief Executive Officer hereunder:

	 	(a)	the Company will pay the Employee the sum of US$50,000
        per annum, payable in monthly installments of $4,166.67 no later than
        the last working day of the month. The Employee may elect to have any
        compensation payable hereunder paid into any jurisdiction of his choice,
        but the Company may decline to pay such compensation to the Employee at
        the place specified if the Company determines that such payment in such
        jurisdiction would violate the laws of the jurisdiction of the place of
        payment specified by the Employee or the laws of any other country or
        if the Company otherwise determines that payment to the Employee or for
        his account in such place would be prejudicial to the Company; 

	 	 	 
	 	(b) 	Where on a monthly basis the Employee has provided
        in excess of eighty (80) hours, up to a maximum of $10,000, the incremental
        will be remunerated in the form of common shares of the Company to be
        issued in accordance with the rules and regulations of the TSX Venture
        Exchange. Such increment will be earned at the rate of $55.00 per hour.
      

	 	 	 
	 	(c)	 the Company will grant the Employee incentive
        stock options in such amount and on such conditions as the Board of Directors
        of the Company may determine from time to time; and 

	 	 	 
	 	(d)	the Company will provide the Employee and his immediate
        family (consisting of spouse and children) with medical, dental and related
        coverage as are available to the other employees of the Company. The Company
        will also provide reasonable life insurance and accidental death coverage
        with proceeds payable to the Employee's estate or specified family member.
      

	 	 	 
	 	(e)	in recognition of the Employee’s work and effort
        from January 1, 2003 to December 31, 2003, specifically in respect of
        the reorganization which closed on December 19, 2003; the Employee shall
        receive a one-time consideration of 











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	 	 	$38,000. This consideration shall be paid with $5,000
        in cash and a $33,000 stipend to be applied against the exercise of the
        Company’s stock options. In addition for services rendered prior
        to January 1, 2003 Employee shall be paid a stipend in the amount of the
        invoices already submitted by Employee for 2001 and 2002. The cash stipend
        shall be applied against the exercise of the Company’s stock options.
        Payment of the cash portion shall be made no later than January 15th
        2004 whereas the exercise of options shall be made within 10 working days
        of the stock option grant. 



 6.            Expenses
   

 The Company will reimburse the Employee for any and all reasonable
  and documented expenses actually and necessarily incurred by the Employee in
  connection with the performance of his duties under this Agreement. The Employee
  will furnish the Company with an itemized account of his expenses in such form
  or forms as may reasonably be required by the Company and at such times or intervals
  as may be required by the Company. 

 7.           Review
  of Agreement Upon Financial Close  

 Whereas the purpose of the organization of the Company is
  to commercially develop the Raft River, Idaho geothermal resource, it is mutually
  acknowledged that the working time commitment and compensation of the Employee
  may materially change upon procurement of a Power Purchase Agreement and the
  closing of a financial package to construct and commission an electrical generation
  facility. The Company shall request that the Executive Committee of the Board
  of Directors, within fifteen (15) working days of said close to review and if
  deemed appropriate replace this Employment Agreement with a new employment agreement.
  Such an undertaking shall not be construed as a contractual obligation on the
  part of the Company to provide an increase in compensation. 

 8.           Change
  of Control  

 Cognizant that the Company is a publicly owned entity, should
  a Change of Control occur, the Employee, at his option shall elect to receive
  compensation of $75,000 no later than five (5) working days after the effective
  date that the Change of Control has occurred. This compensation is payable by
  the Company or its Successor regardless of whether or not the Employee continues
  under employment pursuant to this Employment Agreement or is replaced with a
  new agreement. 

 9.           Termination
   


 	This Agreement and the Employee's employment may be terminated by the









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 Company summarily and without notice, payment in lieu of notice,
  severance payments, benefits, damages or any sums whatsoever, on the occurrence
  of any one or more of the following events:

	 	(a)	The Employee’s failure to carry out his duties
        hereunder in a competent and professional manner; 

	 	 	 
	 	(b)	The Employee’s appropriation of corporate opportunities
        for the Employee’s direct or indirect benefit or his failure to disclose
        any material conflict of interest; 

	 	 	 
	 	(c)	The Employee’s plea of guilty to, or conviction
        of, an indictable offence once all appeals (if any) have been completed
        without such conviction having been reversed; 

	 	 	 
	 	(d)	The existence of cause for termination of the Employee
        at common law including but not limited to cause related to fraud, dishonesty,
        illegality, breach of statute or regulation, or gross incompetence; 

	 	 	 
	 	(e)	 Failure on the part of the Employee to disclose
        material facts concerning his business interests or employment outside
        of his employment by the Company, provided such facts relate to the Employee’s
        duties hereunder; 

	 	 	 
	 	(f)	Refusal on the part of the Employee to follow the reasonable and lawful
      directions of the Company;
	 	 	 
	 	(g)	Breach of fiduciary duty to the Company on the part of the Employee; 
	 	 	 
	 	(h)	Material breach of this Agreement or gross negligence
        on the part of the Employee in carrying out his duties under this Agreement;
        or 

	 	 	 
	 	(i) 	A declaration of bankruptcy on the part of the Employee by a court of
      competent jurisdiction. 


9.1    In the event of the early
  termination of the Agreement for any reason set out in Section 9 above, the
  Employee shall only be entitled to such compensation as would otherwise be payable
  to the Employee hereunder up to and including such date of termination, as the
  case may be. 

 9.2    This Agreement and the Employee's
  employment may be terminated on notice by the Company to the Employee for any
  reason other than for the reasons set out in Section 9 above of this Agreement
  upon one month notice to the Employee. In such event, the Employee will be entitled
  to payment of salary and expenses until the date one month after which notice
  was given. 








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 9.3    This Agreement and the Employee's
  employment may be terminated on notice by the Employee to the Company for any
  reason upon one month notice to the Company. In such event, the Employee will
  be entitled to payment of salary and expenses until the date one month after
  which notice was given. 

 10.           Confidential
  Information  

 The Employee agrees to keep the affairs and Confidential Information
  (as defined below) of the Company strictly confidential and shall not disclose
  the same to any person, company or firm, directly or indirectly, during or after
  his employment by the Company except as authorized in writing by the Board.
  "Confidential Information" includes, without limitation, the following types
  of information or material, both existing and contemplated, regarding the Company
  or its parent, affiliated or subsidiary companies: corporate information, including
  contractual licensing arrangements, plans, strategies, tactics, policies, resolutions,
  patent, trademark and trade name applications; any litigation or negotiations;
  information concerning suppliers; marketing information, including sales, investment
  and product plans, customer lists, strategies, methods, customers, prospects
  and market research data; financial information, including cost and performance
  data, debt arrangements, equity structure, investors and holdings; operational
  and scientific information, including trade secrets; technical information,
  including technical drawings and designs; any information relating to any mineral
  projects in which the Company has an actual or potential interest; and personnel
  information, including personnel lists, resumes, personnel data, organizational
  structure and performance evaluations. The Employee agrees not to use such information,
  directly or indirectly, for his own interests, or any interests other than those
  of the Company, whether or not those interests conflict with the interests of
  the Company during or after his employment by the Company. The Employee expressly
  acknowledges and agrees that all information relating to the Company, whether
  financial, technical or otherwise shall, upon execution of this Agreement and
  thereafter, as the case may be, be the sole property of the Company, whether
  arising before or after the execution of this Agreement. The Employee expressly
  agrees not to divulge any of the foregoing information to any person, partnership,
  Company or other legal entity or to assist in the disclosure or divulging of
  any such information, directly or indirectly, except as required by law or as
  otherwise authorized in writing by the Board. The provisions of this Section
  10 and Section 10.1 below shall survive the termination of this Agreement. 

 10.1    The Employee agrees that
  all documents of any nature pertaining to the activities of the Company or its
  related corporate entities, including Confidential Information, in the Employee's
  possession now or at any time during the Employee's period of employment, are
  and shall be the property of the Company and that all such documents and copies
  of them shall be surrendered to the Company when requested by the Company. 

 11.           Non-Competition
   


 	During the Non-Competition Period (as defined below), the Employee shall not,









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 either individually or in partnership or jointly or in conjunction
  with any other person, entity or organization, as principal, agent, consultant,
  lender, contractor, employer, employee, investor, shareholder or in any other
  manner, directly or indirectly, advise, manage, carry on, establish, control,
  engage in, invest in, offer financial assistance or services to, or permit the
  Employee's name or any part thereof to be used by, any business in geothermal
  resources that competes with the business of the Company, its parent, affiliated
  or subsidiary companies, or any business in which the Company, its parent, affiliated
  or subsidiary companies is engaged. Competition, for purposes of this paragraph
  is defined as a 100-mile radius around any and all geothermal properties acquired
  by the Company up to and inclusive of the date of termination. For purposes
  of this Agreement, “Non-Competition Period” means a period ending
  twelve (12) months after the end of the termination of this Agreement. 

 12.           Acknowledgement
   

 The Employee acknowledges that damages would be an insufficient
  remedy for a breach by him of this Agreement and agrees that the Company may
  apply for and obtain any relief available to it in a court of law or equity,
  including injunctive relief, to restrain breach or threat of breach of this
  Agreement by the Employee or to enforce the covenants contained therein and,
  in particular, the covenants contained in Sections 10 and 11, in addition to
  rights the Company may have to damages arising from said breach or threat of
  breach. The Company, in turn, acknowledges that in seeking remedy in a court
  of law or equity, it is not attempting to deny the Employee, if in good faith
  he is seeking to improve his financial well being. 

 13.           Representations
  and Warranties  

 The Employee represents and warrants to the Company that the
  execution and performance of this Agreement will not result in or constitute
  a default, breach, or violation, or an event that, with notice or lapse of time
  or both, would be a default, breach, or violation, of any understanding, agreement
  or commitment, written or oral, express or implied, to which the Employee is
  currently a party or by which the Employee or Employee's property is currently
  bound. 

 14.           Governing
  Law  

 This Agreement shall be construed and enforced in accordance with the laws
  of the State of Idaho, USA. 

 15.           Entire
  Agreement  

 This Agreement constitutes the entire agreement between the
  parties hereto with respect to the relationship between the Company and the
  Employee and supersedes all prior arrangements and agreements, whether oral
  or in writing between the parties hereto with respect to the subject matter
  hereof. 








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 16.           Amendments
   

 No amendment to or variation of the terms of this Agreement
  will be effective or binding upon the parties hereto unless made in writing
  and signed by both of the parties hereto. 

 17.           Assignment
   

 This Agreement is not assignable by the Employee. This Agreement
  is assignable by the Company to any other company, which controls, is controlled
  by, or is under common control with the Company. This Agreement shall enure
  to the benefit of and be binding upon the Company and its successors and permitted
  assigns and the Employee and his heirs, executors and administrators. 

 18.           Severability
   

 Any provision of this Agreement that is prohibited or unenforceable
  in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
  of the prohibition or unenforceability and shall be severed from the balance
  of this Agreement, all without affecting the remaining provisions of this Agreement
  or affecting the validity or enforceability of such provision in any other jurisdiction.


 19.           Headings
   

 The division of this Agreement into Sections and the insertion
  of headings are for convenience or reference only and shall not affect the construction
  or interpretation of this Agreement. 

 20.           Time
  of Essence  


Time shall be of the essence in all respects of this Agreement.


 21.           Independent
  Legal Advice  

 The Employee agrees that he has had, or has had the opportunity
  to obtain, independent legal advice in connection with the execution of this
  Agreement and has read this Agreement in its entirety, understands its contents
  and is signing this Agreement freely and voluntarily, without duress or undue
  influence from any party. 

 22.           Notice
   

 Any notice required or permitted to be made or given under
  this Agreement to either party shall be in writing and shall be sufficiently
  given if delivered personally, by electronic transmission, or if sent by prepaid
  registered mail to the intended recipient of such notice at their respective
  addresses set forth below or to such other address as may, from time to time,
  be designated by notice given in the manner provided in this Section: 








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 In the case of Company: 

  US Geothermal Inc.

  1509 Tyrell Lane, Suite B 

  Boise, Idaho 83706 

  Attention: Corporate Secretary 

  Fax No.: 208 424 1030 

 In the case of Employee: 

Daniel Kunz

  1509 Tyrell Lane, Suite B 

  Boise, Idaho 83706 

  Fax No.: 208 424 1030 

 21.1    Any notice delivered to
  the party to whom it is addressed shall be deemed to have been given and received
  on the day it is so delivered or, if such day is not a business day, then on
  the next business day following any such day. Any notice mailed shall be deemed
  to have been given and received on the 10th business day following the date
  of mailing. In the case of facsimile transmission, notice is deemed to have
  been given or served on the party to whom it was sent at the time of dispatch
  if, following transmission, the sender receives a transmission confirmation
  report or, if the sender’s facsimile machine is not equipped to issue a
  transmission confirmation report, the recipient confirms in writing that the
  notice has been received. 


 	IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day and year first above written.


 US GEOTHERMAL INC.

	By:	 	 
	 	
 	 
	 	Authorized Signatory	 


 SIGNED by the Employee in the presence of: 

 

	
	 	

	Witness	 	Daniel Kunz












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	Printed Name of Witness